Return to site

Facebook is facing an existential test its leadership is failing to address

Using Facebook is like writing your life story down on a piece of paper, then taping it to a lamppost.

  • Facebook's reaction to a year of scandal has vacillated between defensive cluelessness and aloof silence.
  • Users are getting the message that information they post on Facebook can be used in ways they did not intend, and usage is starting to decline.
  • Meanwhile, executives are selling shares like crazy, including a plan by Mark Zuckerberg to sell almost $13 billion worth of shares by mid-2019.

Facebook is facing an existential test, and its leadership is failing to address it.

Good leaders admit mistakes, apologize quickly, show up where they're needed and show their belief in the company by keeping skin in the game.

Facebook executives, in contrast, react to negative news with spin and attempts to bury it. Throughout the last year, every time bad news has broken, executives have downplayed its significance. Look at its public statements last year about how many people had seen Russian-bought election ads — first it was 10 million, then it was 126 million.

Top execs dodged Congress when it was asking questions about Russian interference. They are selling their shares at a record clip.

The actions of Facebook execs now recall how execs at Nokia and Blackberry reacted after the iPhone emerged. Their revenues kept growing for a couple years -- and they dismissed the threats. By the time users started leaving in droves, it was too late.

There's no outside attacker bringing Facebook down. It's a circular firing squad that stems from the company's fundamental business model of collecting data from users, and using that data to sell targeted ads. For years, users went along with the bargain. But after almost a year of constant negative publicity, their patience may be waning.

Facebook did not initially respond to questions or a request for comment from CNBC.

The drumbeat

For more than a year now, Facebook has been deflecting stories about how its platform was used during the 2016 presidential election.

Some of this activity — like Facebook embedding workers with the Trump campaign to tell them how to advertise more effectively — was perfectly legal, and in line with normal business practices. A lot of these tactics would probably have drawn no scrutiny if Donald Trump hadn't surprised everybody by winning an election that all the polls showed him losing.

Other activity was against Facebook's policies, or outright illegal. Most notably, a U.S. grand jury recently indicted 13 Russian nationals for conducting a disinformation campaign on American soil intended to further political divisions in the country and sway the election toward Trump. Their tactics included using Facebook groups to organize divisive political protests and buying targeted ads.

CEO and founder Mark Zuckerberg has remained aloof throughout the whole sequence of events.

He addresses some of these issues on personal Facebook posts, but seldom talks to the press about them. Last year, he spent most of the year doing photo ops with people around America, but did not show up when Congress asked questions about how the Russians used Facebook to influence the 2016 election.

This year, he announced his annual personal challenge would be fixing Facebook — in other words, doing his job as the CEO of a publicly traded company worth more than $500 billion. In past years, he's taught himself Mandarin and hunted his own food.

The spin

Over the weekend, Facebook gave a case study in how the company reacts inappropriately to negative news.

On Friday night, Facebook made a surprise announcement that the company had suspended a political analytics research firm, Cambridge Analytica. The firm was funded by large Republican donor Robert Mercer, and Trump's campaign used it to target ads on Facebook.

All Posts

Almost done…

We just sent you an email. Please click the link in the email to confirm your subscription!